Glossary

A provision of a note which allows the lender to require repayment of the loan in full before the end of the loan term. The option may be exercised due to breach of the terms of the loan or at the discretion of the lender.

Caps (interest)

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan. For example, if your per-period cap is 1% and your current rate is 7%, then your newly adjusted rate must fall between 6% and 8% regardless of actual changes in the index.

Caps (payment)

Consumer safeguards which limit the amount monthly payments on an adjustable-rate mortgage may change. Since they do not limit the amount of interest the lender is earning, these consumer safeguards may cause negative amortization.

Cash Out

Any cash received when you get a new loan that is larger than the remaining balance of your current mortgage, based upon the equity you have already built up in the house.The cash out amount is calculated by subtracting the sum of the old loan and fees from the new mortgage loan.
For example, if your existing loan is $100,000, you might refinance it with a loan of $120,000. After you pay off your current loan ($100,000) and any loan-origination costs for the new loan (for example $2,000 in points), you would be left with $18,000 cash out.
Cash-out loans may not be available for all types of property.

Cashier’s Check (or Bank Check)

A check whose payment is guaranteed because it was paid for in advance and is drawn on the bank’s account instead of the customer’s.

Ceiling

The maximum allowable interest rate of an adjustable rate mortgage.

Certificate of Eligibility

Document issued by the Veterans Administration to qualified veterans which verifies a veteran’s eligibility for a VA guaranteed loan. Obtainable through local VA office by submitting form DD-214 (Separation Paper) and VA form 1880 (request for Certificate of Eligibility).

Certificate of Title

Written opinion of the status of title to a property, given by an attorney or title company. This certificate does not offer the protection given by title insurance.

Certificate of Veteran Status

FHA form filled out by the VA to establish a borrower’s eligibility for an FHA Vet loan. Obtainable through local VA office by submitting form DD 214 (Separation Paper) with form 26-8261a (request for certificate of veteran status).

Chain of Title

The chronological order of conveyance of a property from the original owner to the present owner.

Closing (or Settlement)

The settlement or closing is the conclusion of your real estate transaction. It includes the delivery of your security instrument, signing of your legal documents and the disbursement of the funds necessary to the sale of your home or loan transaction (refinance).

Closing Costs

Costs for services that must be performed before your loan can be initiated. Examples include title fees, recording fees, appraisal fee, credit report fee, pest inspection, attorney’s fees, and surveying fees.

COFI

See Cost of Funds Index.

Collateral

Assets (such as your home) pledged as security for a debt.

Commission

Money paid to a real estate agent or broker for negotiating a real estate or loan transaction.

Commitment

A promise to lend and a statement by the lender of the terms and conditions under which a loan is made.

Condominium

A form of property ownership in which the homeowner holds title to an individual dwelling unit and a proportionate interest in common areas and facilities of a multi-unit project.

Conforming Loan

A mortgage loan which meets all requirements to be eligible for purchase by federal agencies such as FNMA and FHLMC. The maximum conforming loan amount is $240,000 for a one-unit property.

Contingency

A condition which must be satisfied before a contract is legally binding.

Contract of Sale

The agreement between the buyer and seller on the purchase price, terms, and conditions of a sale.

Conventional Loan

Loans that are not made under any government housing program; they are not subject to the restrictions of government housing programs, such as loan size limits.

Conversion Clause

A provision in some ARMs that allows you to change an ARM to a fixed-rate loan, usually after the first adjustment period. The new fixed rate will be set at current rates, and there may be a charge for the conversion feature.

Convertible ARMs

A type of ARM loan with the option to convert to a fixed-rate loan during a given time period.

Conveyance

The document used to effect a transfer, such as a deed, or mortgage.

Cost of Funds Index (COFI)

An index of the weighted-average interest rate paid by savings institutions for sources of funds, usually by members of the 11th Federal Home Loan Bank District.

Credit Report

A report detailing the credit history of a prospective borrower that’s used to help determine borrower creditworthiness.